Joan Burton (Dublin West, Labour) | Oireachtas source

-----so this is what Fine Gael is planning, and there are a few things I want to draw attention to in it.

Under the summer economic statement, the share of public spending in GDP will decline from 28.9% in 2016, which is already one of the lowest in any advanced country, to 25.3% in 2021. This is a shocking decline over a five-year period in the share of public spending and unprecedented, particularly for a country in recovery, even though I understand that many people in this Chamber do not believe there is any recovery, but actually, there is. When I entered Government, 330,000 people had lost their jobs. Now, as the statement sets out, more than half of those people are back at work. We still have a long way to go. The fall in the share of public spending from 28.9% in 2016 to 25.3% in 2021, however, is very shocking, and if the Minister, Deputy Donohoe, gets a chance to explain anything to us - better still, the Minister for Finance, Deputy Noonan - I would like him to go through those figures with us.

The share of gross current spending in GDP is set to decline from 26.7% in 2016 to 22.6% in 2021. It has fallen, and will fall, over the five years very dramatically unless, of course, these figures are wrong, although we must take in good faith that the Department and the Ministers have put in the figures as honestly as they could. Gross capital spending is set to increase, as was pointed out by the Ministers in their statement, from 2.2% of GDP in 2016 to 2.7% in 2021. However, even this increase is below what is required. Why is this happening? The planned growth in spending is only a fraction of the rate of growth in GDP, as both Ministers have said in their statements. Between 2016 and 2021, nominal GDP cash value is set to increase by 29.3%. That is a really good rate of growth, one of the best growth rates of any European country. However, over the same period, planned increase in gross current spending is 9.6%, as opposed to an increase of 29.3%. Over the same period, therefore, the planned increase in gross current expenditure is 9.6%. Taking account of the faster increase in capital spending, which I have acknowledged, total gross expenditure increases by only 13.3%.

The summer economic statement is grounded in the EU fiscal rules and specifically in the expenditure benchmark rule, EBR. The EBR states that unless funded by additional taxation measures, spending should only grow in line with the sustainable or trend rate of growth in the economy, that is, GDP. If this rule is followed, then the share of public spending in GDP will remain broadly stable. However, the Government plans only to allocate just over half of the fiscal space, 51%, to increases in spending. Some 23% of the space, or €2.54 billion, is allocated to the abolition of the USC in a way which will favour the better off, and I will come back to that if I have time. Indexation of the tax system, by the way, could be achieved for approximately €1.8 billion. Of the fiscal space, however, 23% is allocated to the rainy day fund, that is, €3 billion is allocated in the later years of the statement to the rainy day fund at a rate of €1 billion a year. This is totally unnecessary since adhering to the fiscal rules is sufficient to keep the public finances safe. I know it is catchy and sounds attractive and given what people have been through and suffered, it sounds fantastic that we will put all that money away towards the end of the five-year period and lock it away and keep it safe but from whom? Is it from people? Is it from our economy, while cutting in effect the share of current spending very dramatically over the five years?

This is why I say this is the first example of what Fine Gael, as an admittedly very conservative, right-wing party, would do on its own. It has been allowed do this, notwithstanding the fact it is in government with a number of Independents, without any let or restraint apparently being imposed on them by those in government. Having listened down through the years to the Minister for Transport, Deputy Ross, however, I know that he is generally of a very conservative fiscal outlook. He is not in any way lacking in any kind of humanity but he is very conservative. Maybe he has been the cheerleader of this extraordinary turnaround in terms of how to produce a recovery for everybody in this country in a way that is fair and geared particularly at getting more people back to work, with low-income and middle-income people then sharing as much as possible in the fruits of any growth or increase.

I will give the Minister my honest view. I know he means very well but to allocate so much money to a rainy day fund is absolutely ridiculous when the need to restore public services is so acute. For instance, we must still get more people back to work. We have already heard people commenting in the period that this new Dáil has been operating on the need to invest in the health services and the Minister has done some of that in the additional allocations. We know we must invest in housing for our increased population.

I want to make two other points. First, there is no provision in this at all for increasing social welfare rates. Last year, the year before and the year previous to that, I devoted significant amounts of money to this.

For example, when I was Minister for Social Protection I devoted €200 million of additional spending each year simply to meeting the population pressures of the growing number of older people in our society, to maintaining their pensions and to maintaining particular measures such as the free travel pass, which is iconic to older people in Ireland, and with regard to people in receipt of carer's allowance and disability allowance.

There is no provision for public pay restoration beyond 2018. The Minister and I know, because we were involved in this discussion when we were in government together, that the priority, of course, is to unwind the financial emergency measures in the public interest, FEMPI, legislation and make provision through the Lansdowne Road agreement. However, according to the table on page 27, the roll-out of the Lansdowne Road agreement stops at the end of 2018. There is an additional €300 million for each of those years, together with the additionality for this year. What will happen to public sector pay between 2019 and 2021? Nada - nothing. Is this realistic? I am not sure it is totally realistic. Frankly, I am surprised, and I am sure it did not escape the Minister's attention.

Everything is being sacrificed down the road for the rainy day fund. It starts in 2019 to be built up to €3 billion. Perhaps it is simply a bargaining chip for potential negotiations that will take place in the years from 2019 to 2021. Perhaps the Minister will enlighten us on his thinking.

I wish to speak about the tax package and the approach to tax mentioned in the plan. The tax package in the plan appears to have a built-in bonus for the better off. In contrast, in the recent general election campaign, the Labour Party - I thought Fine Gael agreed with this - envisaged abolishing the universal social charge for anyone earning less than €72,000. Fianna Fáil's plan was to go slightly higher, at €80,000, if memory serves me right, and Sinn Féin's plan was to stop at approximately €21,000. It was very low. We proposed that it be capped for anyone earning more than €70,000, and for anyone earning more than €120,000 relief would be clawed back.

The plan in the summer economic statement seems unfair and unwise in a recovering economy. While there is provision for more capital spending, it is limited and not sufficient to address bottlenecks in the economy and the population and demographic pressures the country faces, with growing populations of younger people and older retired people. This alone requires €200 million extra of social welfare spending in every year, as it has done since 2011.

The rainy day fund is a catchy idea but difficult to fathom. In an economy which has faced enormous limitations on capital expenditure due to the crisis from 2008 on, it seems odd to set aside €3 billion for the fund. Furthermore, I repeat that it is not required under EU fiscal rules. The small matter of the Lansdowne Road agreement is not addressed after 2018. In effect, there is no provision for public sector pay restoration after 2018.

When in government, the Labour Party worked to produce a balanced recovery which would increase employment. As we left the Government, unemployment had decreased to 7.8% from a high of more than 15%, which we had inherited from the previous Government. Many people, particularly young people and older unemployed people aged over 52, are still unemployed and very anxious to get back to work, to get into work or to get an apprenticeship or training, particularly if they are young and beginning their careers. Older people in their 50s face many obstacles to getting jobs if they have been unfortunate enough to lose them.

People throughout the country have made heroic sacrifices. Fine Gael has acknowledged on many occasions the sacrifices people have made. They deserve much better in terms of restoring the level and quality of public services and the development of a fairer and more progressive tax system, rather than favouring tax cuts which proportionately benefit the better off and the highest paid.

In 2014, 2015 and this year, we achieved improvements in the living alone allowance for the first time in 22 years, a small increase in the weekly pension, and a 75% or 80% restoration of the Christmas bonus, which goes not just to pensioners but to people in receipt of the loan parent allowance and the long-term unemployed. What will happen to all of this? The money is there for 2016, according to the Estimates that have been published so far, for measures such as the Christmas bonus. If the regime set out is followed, is the Government really telling us that public sector spending as a share of overall GDP and a share of the overall economy over a five-year period will fall dramatically? From an economic point of view, in terms of demand in Ireland and people having confidence and spending, it is a recipe for returning to much darker horizons for the Irish economy. The Minister promised that there would be a new way of doing politics. Unfortunately, we only received notice of this approximately one hour before it was published. We did not really get anything like a real briefing from the Minister's officials, because the rules do not really seem to have changed as yet. For heaven's sake, it would be worth the Government's while talking to people about what is in the statement, because I can tell the Minister it will not do the general health of the economy and the growth of the economy an awful lot of good.

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